Finance For Two
Living, spending and saving together.
If you plan to move in with your sweetie after graduation, there are five things you need to know:
- This probably isn't the love of your life.
- The relationship almost certainly won't last forever.
- Therefore, keep things simple.
- Draft a written financial agreement defining the responsibilities of each party and state who owns what.
- Agree to go to a mediator and split the cost 50-50 if ending the relationship becomes messy and you can't reach an agreement on your own.
At this stage in your life, you probably see little need for financial planning. This can lead to anger and resentment in the future, because folding two lives together is hard enough without fretting about money - and ending a relationship is never easy.
Start by defining your financial styles. If one of you is a saver and the other is a spender, there may be trouble ahead.
A written financial agreement will define the basics. If your partner sees no need for a financial plan, try this: Estimate your weekly expenses, including food, utilities, Internet and other household costs. Multiply the total by 52 and add in the rent. That's real money, even when divided by two.
No matter how committed to each other you are now, the outside world may not honor that commitment unless it's in writing.
When drafting a contract for a live-in relationship, start with the basics: Personal property each partner brings to the relationship remains that person's property if you later split. Don't buy a car, stereo, TV, furniture or other expensive items together because this could create rancorous disputes if the relationship ends badly. Instead, make major purchases his or hers and keep a written record of who bought what and when. Save your receipts.
Keep all credit, savings and retirement accounts separate, but consider a joint checking account for household expenses.
Maintaining separate health insurance coverage will keep things simple. However, if one partner works full-time and the other pursues a graduate or professional degree, it may be possible for the job-holder to carry the other person on the company health plan. If so, the non-working partner should pay the additional cost of the coverage. Check with a pro because there may be tax consequences.
Both partners should sign the lease on the residence. If one partner is moving into an apartment with an existing lease, add the second person to the agreement with your landlord. This will be routine for most landlords, especially in university towns. Remember: Failure to add the second person may violate the terms of the lease.
If you're moving into a desirable apartment, spell out who has right of first refusal to pick up the lease if the relationship ends.
Both partners should sign the agreement and keep copies for themselves. The agreement can be modified at any time if you both agree - just draft a new agreement and tear up the old or make additions to the existing agreement.
The agreement should state that both of you will be civil if the relationship ends and that you agree to split expenses equitably. It's a good idea to include a paragraph that says you'll go to a mediator and split the cost 50-50 if you can't reach an agreement on your own. A well-written domestic partner agreement will define the responsibilities of both parties and help avoid arguments if the relationship ends. It will also simplify matters if you must go to court to enforce it. If things end badly, it will feel like a divorce.
A good financial plan and a clearly written domestic partner agreement can help avoid money problems when you're together and help avoid the worst if the relationship ends.
Good luck. Remember that love doesn't conquer all - and don't forget to nail down who takes out the garbage.
The Web sites of major brokerage houses and banks offer solid financial tips to grads, including T. Rowe Price (TROW), Merrill Lynch (MER), JPMorgan Chase (JPM), Wells Fargo Bank (WFC) and Wachovia (WB).
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